Implementation of the EU legislation on Romanian power industry. Romanian legislation: achievements and shortcomings

Implementation of the EU legislation on Romanian power industry. Romanian legislation: achievements and shortcomings

Energy 30 (2005) 1365–1376 www.elsevier.com/locate/energy Implementation of the EU legislation on Romanian power industry. Romanian legislation: achi...

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Energy 30 (2005) 1365–1376 www.elsevier.com/locate/energy

Implementation of the EU legislation on Romanian power industry. Romanian legislation: achievements and shortcomings Mihai Cruceru a,, Mihai Marius Voronca b, Bogdan Diaconu a a

Department of Power Plants, University ‘‘Constantin Brancusi’’ Targu Jiu, 1 Republicii, RO-1400 Targu Jiu, Gorj, Romania b Government of Romania, 1 Piata Victoriei, sector 1, RO-712011 Bucharest 63, Romania

Abstract In the last decade, Romania drew up specific integration and EU directives implementation programs for main economy sectors. The paper aims to present: (1) structural changes of power sector; (2) main pieces of Romanian legislation regarding the interaction between energy conversion technologies and environment; (3) evolution trends of the pollution generated by thermal power units; (4) difficulties encountered in the process of alignment to the EU provisions. # 2004 Published by Elsevier Ltd.

1. Introduction On medium term, the development of the Romanian power sector will mainly focus on some strategic areas. Removing payment arrears, improving the activity of the most inefficient energy end-users, creating the institutional frame, consolidating energy market mechanisms compatible with the EU norms and directives, and investing to modernize and rehabilitate the equipment are the most important. The continued existence of state monopolies in all sub-sectors of the energy field resulted in a lack of stimuli for energy saving, a shortage of financial funding for the acquisition of highefficiency equipment and technology, and a preponderance of energy-intensive industrial enterprises with obsolete equipment. The rehabilitation of the Romanian energy sector will be a costly task. As presented in the National Strategy of the Energy Sector Development on Medium Term [1], a total amount of 

Corresponding author. Fax: +40-253-214462. E-mail address: [email protected] (M. Cruceru).

0360-5442/$ - see front matter # 2004 Published by Elsevier Ltd. doi:10.1016/j.energy.2004.02.018

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5 billion US dollars has to be devoted to new investments in the energy sector that would come from external sources, the proceeds from privatization and the state budget. The power production efficiency is of 33% due to the age of plants’ equipment: 73% of them are more than 20–40 years old, while the technologies in use are from 1970. This situation, together with the extra costs from loans for fuel acquisition resulted in a 400 million US dollars loss in 2001 for Termoelectrica (the main coal and hydrocarbons fired power plants electricity producer). The Law for Energy Efficiency [2] entered into force in 2000 but energy consumption optimization is relatively new for the Romanian economy. To accomplish this goal, the government intends to spend 10% of its income on an energy development fund. Recently, the Romanian Fund for Energy Efficiency (FREE) was created [3]. Acting as a non-governmental association, FREE will provide reimbursable financial support to private companies for energy efficiency improvement projects. In addition to the difficulties of economic transition, most Eastern Europe countries, and particularly Romania face a new problem, which arose in its acute form only recently—the interaction between energy conversion technologies and environment. Most Romanian power units were designed and put in operation at a time when environmental problems were condoned or not considered thoroughly. The power industry’s long-term effect upon the environment was underestimated if not neglected completely since the priority, dictated politically rather than on rational scientific ground in a global context, was economic effectiveness. However, acute problems did not cease to occur; these were treated individually, incoherently, without considering the ensemble, the global, cumulative and synergic effects. Romania is definitely a special case, an example to avoid in this respect. On the other side, it is worthy to mention that in the period of the steepest development of the Romanian power industry (1965– 1980), the legislative constraints were quite loose. This was a consequence of a lack of knowledge about pollution generated by industrial activities. Only when serious environment perturbations (especially global climate changes) were noticed was the impact realized. As a result, the legislation imposed tighter standards and companies had to either change the technologies or to invest in equipment for mitigation of pollution. The industrial development continued at high rates as compared to the progress made in the respect of environment protection so that pollution generated by industrial activities reached high quotas by the end of 1980s. After 1990, in the context of European integration programs, the decision factors decided to adapt the Romanian legislation to the European pattern, but the correspondent provisions’ implementation encountered serious drawbacks due to the lack of financial resources. 2. Restructuring of energy sector Two of the major objectives of Romania’s energy sector integration into the EU are introducing competition to the energy sector through restructuring and privatization and adjusting energy prices to international prices. These issues remain as important now as they were in the early years of transition. At the beginning of the restructuring process, the National Power Company reshaped the former RENEL (National Electricity Authority) by separating the nuclear sector, design and

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research departments [4]. This resulted in the creation of CONEL, the National Electricity Company, Nuclearelectrica S.A. and Autonomous Regia for Nuclear Activities. On 31 July 2000, the Romanian Government, working towards restructuring completion, decided to unbundle CONEL into four companies [5]: . Transelectrica S.A., a state owned electricity transmission national company; the company has under concession the national transmission grid (220 and 400 kV lines and substations), provides the transmission as well as the overall system operation (dispatching), and covers activities related to the market administration and the international transit, respectively; . Hidroelectrica S.A., a commercial company for the production and delivery of hydroelectric power; . Electrica S.A., the main electricity supplier and distributor in Romania; . Termoelectrica S.A., a commercial company for the production of electrical and thermal energy—electricity generation from thermal power plants, district heating, and related fuel supplies. Other significant steps in the restructuring process of the power sector are: . Electrica, the Distribution Company, was reorganized into eight regional branches and one service subsidiary in June 2001 [6] (reversing a previous organization in 2000 that had set up 19 branches of limited size, which made individual branches less attractive to private investors). . The maintenance activity of Transelectrica, the administrator of the national power transmission network was contracted out [7]. Based on technical, economical and financial analysis on the current situation, the patrimony of Termoelectrica was grouped by categories as follows: 1. Condensation power plants of utmost importance for the National Power System (NPS) operation, that are remaining in a power and heat generation company being under the direct state control. 2. Co-generation power plants, which due to their attractiveness, efficiency, and a relative constant heat market as well as due to the requirement of some important investment achievement, are proposed to be the Termoelectrica’s participation quota in the new joint ventures—independent power producers. 3. Medium and small size co-generation power plants or thermal plants, which due to their local importance are proposed to become independent commercial companies or to be transferred, based on governmental decisions, to other economic agents being under the municipality subordination. These thermal power plants future operation is not needed to cover the NPS load curve, they are only necessary for ensuring the heating of some towns. 4. Thermal power plants or thermal plants which due to their poor financial condition or their physical and moral extended wear, are to be sold (entirely or by parts).

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A special situation is represented by the medium-size thermal power plant located in the Mintia-Deva area, which became a branch owned by Termoelectrica [8]. In a coming future, new independent power producers will appear and, in accordance with the information received from some industrial consumers, they are willing to invest in small and medium-size power generating units that should provide the energy necessary for developing their own activities. The government has already transferred to the local authorities some thermal plants because the heat cost registered by these plants (over 12 US dollars/GJ) is almost three times larger than the energy price set by the National Regulatory Authority for Energy (ANRE) (5 US dollars/GJ). At the same time, solutions are searched for contracting a special credit aimed to finance the heat plants modernization program. The situation is depicted in Fig. 1. Compared to the situation in 2001, when, at the end of the financial year Termoelectrica recorded losses of approximately 400 million US dollars, the total loss estimated for the year 2002 was 80 million US dollars. Since the responsibility of heat delivery was passed to the local authority, an increase of preoccupation for the effective service of the systems of production, transport and distribution of thermal energy is expected. In most cases, rehabilitation of old units or replacement is required. The government supports these actions financially. National Authority for Regularization of Public Services [9] will settle the activity of local units for producing and distributing thermal energy. This structural change is expected to increase the effectiveness of primary energy resources, to improve the actual financial situation and the environment condition. The overall effect of this action will reduce the support provided by the government to Termoelectrica, directing the assistance to the units that will encounter technical or financial problems within the next period.

Fig. 1. Plants’ location on Romanian territory.

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3. Liberalization of energy market Simultaneously with the beginning of restructuring process, the Romanian government decided to open up the electricity market by gradually introducing competition with the purpose of making the energy sector more efficient and the Romanian economy more competitive. Major developments were recorded on competitiveness and internal energy market. In October 1998, was established the ANRE as an independent and autonomous institution called to issue and supervise the implementation of the regulatory legislation for the operation of the energy market [10]. ANRE is responsible for authorizing and licensing, for issuing the operation codes and contracting procedures, approval of tariffs, concession of public assets, etc. Since 1998, the framework contracts as well as the secondary regulations of the power sector were issued by ANRE. Since December 2000, ANRE was brought under the control of the Ministry of Industry and Resources, which now plays an active role in setting electricity tariffs [11]. The initial opening of the energy market was 10% [12]. Eligible consumers meeting the conditions settled by ANRE (consuming more than 100 GW h by year) can directly negotiate the tariffs in a more appropriate way to their needs with the electricity producers, for up to 10% from the total amount of electricity produced at national scale. A supplementary increase with 5% of the market opening was realized [13]. In this respect, all generators, suppliers and eligible consumers fulfilling the technical conditions requested by ANRE are allowed to access the transmission system. Further to the accreditation of new eligible consumers the opening degree of the power market increased from 15% to 25% [14]. Correspondingly, ANRE decided to decrease the yearly consumption limit for the accreditation of new eligible consumers from 100 to 40 GW h. Since January 2002, the market opening degree reached 33% [15]. In accordance with the electricity market liberalization, other 18 independent supply companies were licensed by ANRE to operate on the electricity market. The implementation of the EU legislation has a considerable impact on establishing public service obligations, which in the past were met largely through public utilities or a system of public concessions. Market opening, together with the privatization of some of these companies, determined the government to stipulate certain minimum levels of public service and ensure that these levels are met. EU legislation also provides specific safeguards associated with these objectives, such as user satisfaction, environmental protection, economic and social cohesion, and the obligation of universal supply of electricity. Generally speaking, the electricity sector enjoys a high degree of support and public intervention in the context of old infrastructures and inefficient management methods. The immediate consequence of the market liberalization, and the current trend for companies to subcontract and externalize certain costs, could lead to considerable job losses in the sector, potentially causing unbearable social tensions. In this respect, the direct creation of employment in new activities has to play a compensatory role for all recent unemployment coming from the sector as a result of the market opening. A social security system that adopts innovative measures will help workers in the sector to accept the deregulation process. Ongoing training systems should be also put in place, along with efficient policies for labor market databases.

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4. Environment condition 4.1. Air quality Romania made significant progress in the ratification of international conventions, elaboration of action plans for alignment and adoption of the correspondent acquis: . In the field of environmental impact assessment (Council Directive No. 85/337/EEC on the assessment of the effects of certain public and private projects on the environment) Romania ratified the convention on environmental impact assessment in transboundary context (Espoo Convention) [16]. . In order to ensure appropriate environmental information, public participation through representatives to the preparation of the environmental plans, programs, policies and legislation was approved [17]. . Romania signed in Brussels the agreement between European Community and Romania on the participation of Romania as part of the European Environmental Agency and to the European Network for Information and Observation (EIONET) on 9 October 2000, for the purpose of Council Regulation (EEC) No.1210/90, modified by Council Regulation (EC) No. 933/1999, refers to the establishment of the European Environment Agency and of the European Environment Information and Observation Network (EIONET). The government adopted in June 2001 the draft Law for the ratification of this agreement [18]. . Currently, Romania takes part in the Community Program LIFE III regarding financing the environmental protection [19]. . With a view to ensuring an appropriate legislative framework in the air quality sector, as well as Council Directive No. 96/62/EEC transposition on ambient air quality assessment and management, the Urgency Ordinance No. 243/2000 regarding atmosphere protection was approved by Law [20]. . For the Council Directive No. 93/12/EEC transposition, sulfur content in diesel fuel was limited [21]. . In the climate change sector, the Kyoto Protocol of United Nation Framework convention on Climate Change adopted on 11 December 1997 was ratified [22]. Romania’s energy sector has a strong impact on the country’s environment in relation to oil, gas and coal production. Thermal power plants burning low caloric heat coal and high-sulfur content heavy fuel contribute to air pollution as well, and the low-quality coal that Romanian households burn for heat adds to poor air quality in urban centers. Special attention is paid to the issues of S.C. Termoelectrica S.A. in order to have it meet the requirements for the accession of Romania to the European Union. Thus, taking into account the provisions of the European Directives for LCP (Large Combustion Plants for generation of electricity), and IPPC (Integrated Pollution Prevention and Control), for further reduction of pollutants emissions, Termoelectrica refurbished most of its capacities. The overall result of EU standards implementation was a substantial decrease of gaseous pollutants [23], as shown in Fig. 2.

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Fig. 2. Pollutants emissions evolutions.

As for the greenhouse effect gases, the carbon dioxide emissions decreased almost twice between 1989 and 1997. However, much of the Romania’s decrease in carbon emission in this period was due to power industry cutbacks rather than to energy efficiency measures. Since 1997, implementation of modern pollution control technology contributed increasingly to the downward trend of Romania’s emission level. In 2000, the economic boom overcame the implementation of pollution control technologies and a minor increase of carbon emission was noticed [23], as shown in Fig. 3. Although small fluctuations can be noticed in the evolution of overall amounts of pollutants, specific emissions (reported to MW h) decreased continuously as shown in Figs. 4 and 5. The implementation speed of EU legislation on air emissions in the national electricity industry is presently limited by a series of factors, among which the long-term effect ones were identified: . The need of avoiding social impacts resulting from a possible decrease of mining activities. . Lack of financial resources necessary to mitigate emissions (for a total amount of 5.3 GW in thermal power units on coal, the estimation rises up to 1.6 billion US dollars).

Fig. 3. Carbon dioxide emissions evolution (in Mt).

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Fig. 4. Evolution of gaseous pollutants and dust specific emissions.

. Lack of alternatives with natural gases supply (the regional monopoly of Russian natural gas suppliers). EU legislation impacts on air emissions in the national power industry are reflected in the National Strategy of the Energy Sector Development on Medium Term approved by the government [1]: . Increase of clean fuel utilization (hydropower, nuclear, use of natural gases, switching from lignite to hard coal). . Self-monitoring systems (continuous monitoring for large coal thermal power plants as well as mobile equipment monitoring). Acting in the direction imposed by local environment protection legislation and in anticipation of the impending harmonization with the community environment law, Termoelectrica

Fig. 5. Evolution of carbon dioxide specific emission.

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made substantial financial efforts in 2000 to protect the environment. In the field of atmosphere protection, the following specific actions were taken in the respect of impact evaluation: . Evaluating the emissions of each plant with our own EMPOL calculation models, accepted by the Local Environment Protection Inspection Authority. . Determining the contribution of each plant in local pollution, using its own dispersion models DISPOL. . Determining the contribution of plants to the regional, cross-border pollution. . Evaluating the polluting emissions for all the plants owned by the company, using CORINAIR and IPCC calculation methods, made available and used by the international organizations in this field. . Making measurements of pollutants in the emission of plants with high-performance mobile laboratories. . Determining the contribution of each plant to soil and plant pollution at their location. 4.2. Water quality In the field of water quality, a National Plan for the prevention of water pollution by nitrates from agriculture was drawn up and adopted. Romania is also in the process of identifying and selecting areas to be classified as sensitive areas as regards urban wastewater. This process is of great importance given the costs that will be involved in proper implementation. Romania also adopted a regulation for the organization and functioning of water basin committees in line with the requirements of the recent water framework directive. In terms of water quality, Romanian river waters are classified as follows [24]: . Class I—water that may be rendered drinkable and supplied to localities, or may be supplied to animal breeding farms or used for fish breeding purposes. . Class II—rivers that may be used for fish breeding (excepting salmon breeding), i.e. water supply for industrial and leisure purposes. . Class III—water that may be used for crop irrigation, electric power generation—hydroelectric power stations, industrial cooling plants, laundries and other uses. . Class D—degraded water that does not allow fish breeding. From a spatial density point of view, the river water quality monitoring system in Romania includes one station per less than 1000 km2 of hydrographic basin area, complying with EUROWATERNET procedures and provisions. The river quality assessments performed during 1999 relied upon primary analytical data processing. The data were measured on a monthly basis in 318 category I monitoring sections, located on the main hydrographic basins. A short-term analysis of the evolution trends on water quality was performed by comparing the situation in 1999 and 2000, respectively, and cases of worsening, improvement and stationary were ‘‘counted’’. Considering the total length of the investigated rivers, the situation of the water stretches is the following: class I increased from 35% in 1989 to 61% in 2000; class II totaled 25% in both 1989 and 2000; class III decreased from 18% in 1989 to 6% in 2000; class D decreased from 22% in 1989 to about 8% in 2000 [24]. This improvement is mainly due to some highly polluting industrial units reducing or ceasing their activity, but also to the firm

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enforcement by the competent bodies of the existing legal provisions related to water quality protection. The overall impact of energy industry on water quality in Romania reaches average or low quotas when compared to other industrial activities, or, generally speaking, human activities with impact on environment. Performing a breakdown of wastewater output between economic activities and dividing conventionally the wastewater into four quality classes [24], the figures shown in Table 1 emerge. Substantial progresses towards sustainable management of pollution control were made in the legislative field. In 1993, a Ministerial Declaration was signed in Odessa, referring to the protection of the Black Sea, aiming to control pollution, manage rationally the waste and recover the natural resources. This Declaration specifies the principles, approach, goals and general priorities for the regional activity [25]. The international convention on the civil responsibility for damages generated by hydrocarbon pollution (signed in London, 1992) was ratified [26]. Romania accepted the international management code on safe ship utilization and pollution prevention—ISM Code. Romania signed a number of bilateral agreements with its neighbors and ratified international conventions in order to apply the principles and reach the objectives agreed upon by signing the convention for the protection of the Danube River. Romania signed and ratified the ‘‘Protocol on water and health’’ at the Helsinki convention, whose provisions are going to be implemented [27]. For the particular purpose of controlling and reducing the impact of power industry on environment, special measures were initiated: . Mitigation of chemical pollution, besides general measures like replacing the old technologies: – Reducing the amounts of chemical reagents used in water treatment. – Adopting technologies for concentrating and recovery of slurries from wastewater. – Experimenting at large scale a system for continuous measuring of petroleum derived agents concentration in wastewater. – Measurement of quality indices of evacuated wastewater.

Table 1 Wastewater discharge generated by various economic activities Economic activity resulting in wastewater output

Heat and power Communal services Chemical industry Metallurgical works Extractive industry

Wastewater condition (volumes, in million m3 per year) Wastewater conven- Wastewater that tionally clean needs treatment

Untreated wastewater

Insufficiently treated wastewater

2,780,056 2,025,774 287,024 – –

37,961 782,342 30,633 10,628 –

– 1,058,373 148,379 72,070 57,753

260,769 2,025,542 232,139 135,675 140,173

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. Thermal pollution control including measurements performed on rivers downstream of thermal power plants like Danube, Jiu and Mures and infrared thermography analysis. In the respect of ground water pollution control, measures such as setting up networks for monitoring the ground water quality in areas nearby sterile deposits, maintaining in good condition the monitoring shafts and samples collecting equipment were implemented. Current concerns in the implementation of the EU legislation on Water in the national electricity industry are: . Thermal pollution caused by seasonal flow reduction in rivers supplying thermal power plants cooling system. . Unexpected flow fluctuations downstream of hydropower developments that have to operate in drought conditions. 5. Conclusions Romania is facing a start-up period in redefining the national economy on the basis of concepts like energy efficiency and sustainable development. It became obvious that in order to be effective, restructuring must operate at all levels on one hand—from technical to corporate management aspects, and on the other hand, the key lever for an effective action is energy sector. There is no doubt that Romania made substantial progress regarding the alignments to EU provisions in many respects (open energy market and pollution control) but the concept of sustainable development is yet to be applied and the Romanian power industry has to be retailored following this principle. Structural reforms were re-launched, most notably towards the imminent beginning of privatization campaign and several electricity, thermal energy and natural gas price adjustments were adopted. The salient progress scored is probably the fact that Romania succeeded to penetrate the regional electricity market in Europe; presently, Romania exports energy at competitive prices. Romanian authorities made important steps in the respect of legislation meant to promote energy efficiency. The gap between legislation and its practical enforcement is generated by the fact that domestic institutions have a relatively short experience in this field, especially as regards transposition of legislation and application of economic instruments. Though, environment impact was not considered at its real dimensions. As statistics show, the legislation in pollution control is loosely applied. The cause is definitely the gap between standards it imposes and the performances of relatively old technology, which cannot comply with standards tailored for modern, environment friendly technology.

References [1] Government Decision 647/2001 regarding National Strategy of the Energy Sector Development on Medium Term 2001–2004, Romanian Official Gazette 444, 2001. [2] Law 199/2000 regarding energy efficiency. Romanian Official Gazette 577/2001.

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[3] Urgency Ordinance 124/2001 regarding Romanian Fund for Energy Efficiency. Romanian Official Gazette, 644/ 2001. [4] Government Decision 365/1998 regarding foundation of National Electricity Company, National Society ‘‘Nuclearelectrica’’ and Autonomous Electricity Company ‘‘Renel’’. Romanian Official Gazette, 246/1998. [5] Government Decision 627/2000 regarding reorganization of National Electricity Company. Romanian Official Gazette 357, 2000. [6] Government Decision 1342 regarding reorganization of ‘‘Electrica’’ company. Romanian Official Gazette 47, 2002. [7] Government Decision 710/2001 regarding foundation of the branch Company for Maintenance Services of Electric Transport Network ‘‘SMART’’. Romanian Official Gazette 448, 2001. [8] Government Decision 1182/2001 regarding the foundation of SC ‘‘Termocentrale Deva’’. Romanian Official Gazette 774, 2001. [9] Law 326/2001 regarding residential services. Romanian Official Gazette 359, 2001. [10] Urgency Ordinance 29/1998 regarding foundation and organization of National Authority for Energy Regulation. Romanian Official Gazette 407, 1998. [11] Law 99/2000 regarding foundation and organization of National Authority for Energy Regulation. Romanian Official Gazette 256, 2000. [12] Government Decision 122/2000 regarding the initial value of opening degree of electricity market. Romanian Official Gazette, 77, 2000. [13] Government Decision 982/2000 for increasing the value of opening degree of electricity market. Romanian Official Gazette, 529, 2000. [14] Government Decision 1272/2001 for increasing the value of opening degree of electricity market. Romanian Official Gazette, 832, 2001. [15] Government Decision 48/2002 for increasing the value of opening degree of electricity market. Romanian Official Gazette, 71, 2002. [16] Law 22/2001 regarding ratification of convention on environmental impact assessment in transboundary context. Romanian Official Gazette 105, 2001. [17] Law 86/2000 regarding ratification of convention on information access, public participation through representatives to the preparation of environmental plans, programs and policies. Romanian Official Gazette 224, 2000. [18] Law 622/2001 regarding participation of Romania as part of the European Environmental agency. Romanian Official Gazette 770, 2001. [19] Government Decision 432/2000 regarding financial support for Romanian participants to LIFE program. Romanian Official Gazette 269, 2000. [20] Law 655/2001 regarding atmosphere protection. Romanian Official Gazette 773, 2001. [21] Government Decision 1336/2000 regarding limitation of sulfur content in diesel fuel. Romanian Official Gazette 687, 2000. [22] Law 3/2001 regarding ratification of Kyoto Protocol of United Nations framework convention on climate change, Romanian Official Gazette 81, 2001. [23] Romanian statistical yearbook 2000. Bucharest: Statistics Commission Publishing House; 2001. [24] National Action Plan for Environment Protection, Government of Romania. See also: www.mappm.ro/ informatii/Starea_mediului_ 2001_MAPM/capit_%203.htm. [25] Ministerial Declaration on the Protection of the Black Sea. Odessa, 7 April 1993. See also: www.blackseaenvironment.org/OdessaDeclaration.html. [26] Urgency Ordinance 14/2000 regarding participation of Romania to international convention on preparation, reaction and cooperation in case of hydro-carbons pollution. Romanian Official Gazette 37, 2000. [27] Law 228/2000 regarding protection and usage of transboundary rivers and international lakes, adopted in Helsinki on 17 March 1992. Romanian Official Gazette 629, 2000.